3 Great Reasons Why BG Group plc Is Set To Take Off

Royston Wild looks at the major share price drivers for BG Group plc (LON: BG).

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Today I am looking at why I believe BG Group (LSE: BG) (NASDAQOTH: BRGYY.US) is in great shape to provide gushing returns for shrewd stock investors.

Production levels ready to hit the high notes

The result of maintenance closures in Kazakhstan, reduced drilling work in the US and reservoir drops in Egypt caused total exploration and production volumes to fall 2% in March-June. Analysts expect falling volumes to weigh on earnings this year before rising strongly thereafter — broker Liberum Capital expects that, after a 4% decline in exploration and production volumes in 2013, for output to register a compound annual growth rate (CAGR) of 10% through to 2018.

Promisingly, the company is well on the way to get first production rolling at its gigantic  Queensland Curtis LNG project in 2014, and  has successfully drilled three-quarters of the wells needed to service the two trains at its Australian asset.

Elsewhere, BG Group’s fourth appraisal well at the offshore Iara field in Brazil has also yielded stunning results in recent months. Studies there have revealed possible recoverable reserves and resources comparable to those of the Lula basin. The company’s next two floating production, storage and offloading (FPSO) vessels due to start next year are showing good progress, it says.

Asset acquisitions to boost existing potential

Although BG Group has said that it remains focused on hitting its 2013 milestones for its existing projects — particularly in Australia and Brazil — it remains a shrewd player when it comes to picking out future star assets.

The oil giant announced in August that it had won operator rights for 10 blocks in the Barreirinhas oil basin off the northern coast of Brazil. BG Group has 100% ownership of six of these blocks, with the remainder part-owned with heavyweights Petrobras and Galp Energia.

BG Group says that it expects to spend around $1.8 billion per year through to 2016 on exploration activities, and plans to plough oodles of capital into “early stage origination, discovery and development” in order to maximise early-stage growth opportunities and underpin long-term expansion.

An affordable way to grab stunning production growth

Given that the firm’s production story is in great shape to explode in coming years, I believe that BG Group currently provides decent value for money at current price levels.

The oil specialist currently deals on a P/E rating of 15.7 and 13.5 for 2013 and 2014 respectively, far below an average reading of 20 for the complete oil and gas producers sector. And although City analysts’ expectations of a 5% earnings per share drop this year results in an invalid price to earnings to growth (PEG) reading, a figure of 0.8 for 2014 illustrates the firm’s position as a value stock — any reading below 1 represents excellent bang for your buck.

Get the printers rolling with this Foolish pick

If you are looking for other top blue-chip selections like BG Group which carry blistering growth potential, I strongly recommend that you take a look at this special report which identifies a sterling stock pick in the publishing sector.

The company in question boasts a compelling turnaround story which is forecast to deliver stunning returns in the coming years, and has been declared “The Motley Fool’s Top Growth Share“! Click here NOW to download this exclusive report — it’s totally free and comes with no further obligation.

> Royston does not own shares in BG Group.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

More on Investing Articles

Investing Articles

Down 23%! Should I buy more CrowdStrike shares for my Stocks and Shares ISA?

Sometimes bad news can be good news for long-term investors. But is that the case for CrowdStrike in relation to…

Read more »

Investing Articles

2 UK shares near 52-week lows I’m considering snapping up

These UK shares are loitering near, or at, 52-week lows. Are these prime opportunities for our writer to boost her…

Read more »

Investing Articles

Unilever: a passive income stock with potential for decades of dividend growth

Stephen Wright thinks Unilever can keep reducing its share count for years to come. And this should help make it…

Read more »

Middle-aged black male working at home desk
Investing Articles

Worried about retirement? I’d buy high-yield dividend shares to build wealth

The number of pensioners enduring poverty in the UK looks set to rise. Investing in dividend shares could help Britons…

Read more »

Investing For Beginners

2 boring but beautiful FTSE 100 stocks to add to my ISA

Jon Smith runs over a couple of FTSE 100 stocks that he really likes the look of, even though they…

Read more »

Investing Articles

Here’s how I could supercharge my wealth by snapping up the best dividend stocks!

This Fool explains how dividend stocks play a crucial part of her aspirations to build wealth, and details one pick…

Read more »

Young female analyst working at her desk in the office
Investing Articles

Revenue up 10% and accelerated growth potential for this overlooked FTSE 250 company

Today's first-quarter update from this good-value FTSE 250 company keeps me keen on the stock as recovery and growth continues.

Read more »

Investing Articles

Here’s why I’m so bullish about the BT share price now

The BT share price shot up after FY results, and a couple of months on it's still up there. Might…

Read more »